They say no man is an island. A theory which, applies itself quite suitably to a registered investment adviser (RIA) firm’s compliance program.
How?
While your chief compliance officer (CCO) may lead the compliance charge, they should, by no means, be an island unto themselves, solely responsible for the compliance strategy (and success) of your firm. In order to truly remain in compliance with the Securities and Exchange Commission (SEC), as well as state level regulatory bodies, a firm must define and support a culture which prioritizes compliance.
What is a culture of compliance at an RIA firm?
As the SEC put it, “All firms have a culture with respect to compliance that may vary — the overall culture within which compliance operates can serve to foster and enhance compliance efforts, or, at its worst, it can impede or render compliance efforts meaningless. The culture of compliance is not a new concept…If you’ve been listening, you know it’s not enough to have policies. It’s not enough to have procedures. It’s not enough to have good intentions. All of these can help. But to be successful, compliance must be an embedded part of your firm’s culture.”
Putting a firm’s culture into words can often be difficult, however, firms without a culture of compliance will likely suffer from:
- Apathetic or hostile leadership.
- Boilerplate procedures.
- Disjointed supervisory processes.
- Firm employees only looking out for themselves.
- Unstated or inconsistent vision.
- No time for training.
On the other side of the coin, those firms who are able to instill an active culture of compliance can expect to benefit from:
- Support by firm leadership.
- Policies and procedures uniquely fit to firm needs.
- Integrated systems.
- Staff cooperation and cohesion.
- Common vision.
- Regular staff training/check-ins.
How to develop your RIA’s culture of compliance
In order for your advisory firm and its personnel to embrace a culture of compliance, you have to prioritize the basics. In this case, your policies and procedures. Customizing your policies and procedures, and then continually assessing their efficacy is the baseline for creating your culture of compliance, laying the foundation for what compliance means for your firm and how employees can go about supporting regulatory compliance initiatives.
Once you’ve established your baseline for your compliance program, developing your culture will rely on three main factors:
Onboarding
Every employee within your firm should receive a consistent onboarding which highlights the importance of compliance and the role they will play in helping the firm to remain in compliance with existing and new regulations.
Ongoing support and education
As a compliance professional, one of your main roles is the support of compliance throughout your firm, which includes supporting and educating firm staff on any new regulatory updates, risk points and compliance protocols. Setting monthly or quarterly meetings to educate your firm on compliance challenges and what it means for your employees can help alleviate the unknowns and ensure your entire firm is acting in accordance with your policies and procedures.
Scalable processes
What works for five employees may not work for 500. As your investment firm grows, so will your compliance needs. Incorporating a technology-backed process to automate manual tasks can help your firm achieve compliance no matter how big you scale.
RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.